Sam will contribute $200 to his RRSP at the end of each month for 15 years and then raise his monthly contribution to $500 at the end of each month for the subsequent 20 years. If his investments earn 11.7% compounded monthly, what will be the value of the investments after the last $500 contribution is made 35 years from now?
A) $1,186,877
B) $572,207
C) $1,471,930
D) $521,751
E) $285,054

Question

Quizplus · Accepted Answer

The value of Sam's investments after 35 years can be calculated using the future value of a series formula for annuities, considering the change in monthly contributions after 15 years. For the first 15 years, with a monthly contribution of $200 and an annual interest rate of 11.7% compounded monthly, the future value can be calculated. Then, for the next 20 years, with a monthly contribution of $500 and the same interest rate, the future value of this series is calculated, adding the accumulated value from the first period. The correct calculation leads to a total future value of approximately $1,471,930, making option C the correct answer.

Sam Will Contribute $200 to His RRSP at the End